In the last two years, the West has hit Russia
with an unprecedented package of sanctions.
It hoped that this would make it difficult for Russia
to fund its war against Ukraine.
But you see, Moscow stands largely unaffected because it has
found its way around these very sanctions.
Russian companies are still importing weapon,
parts, tech and equipment. The question is,
how so?
All thanks to cryptocurrency. That's right,
cryptocurrency has been fueling the Ukraine war.
Cryptocurrency is secretive, its untraceable and its everything that Russian
firms had been seeking for secret trading.
In fact, in late 2022,
Russias largest maker of small arms,
Kalashnikov concern needed electrical parts for drones.
It had listed 248 types of electric electronic parts.
Who would supply them, you ask?
A Hong Kong electronics distributor,
Kynex Semiconductor,
KYNIX. But Kalashnikov concern could not approach that company.
the US was cutting such deals off,
and even Chinese banks had grown wary of the sanctions
and started blocking payments from Russia.
There were fears in China that its lenders be targeted
by the West if they are too accommodative of sanctioned
Russian businesses.
And so instead of trading with the Hong Kong electronics
distributor directly,
the Russian arms maker approached A middleman.
His name is Andrei Zwarev.
He is a self-described Russian smuggler based in China.
He had the perfect solution for the Russian companies problems.
Zwarev used the cryptocurrency called Tether to relay millions of
dollars from Kalashnikov to its supplier.
I will tell you how this entire scheme played out.
But before that, let me just tell you a bit
about Tether,
which is a stable coin.
It is begged to the US dollar,
meaning its value fluctuates with the dollar.
It is privately held by Tether Holdings.
The issue is registered in the British Virgin Islands.
It is owned by a small group of individuals.
Tether Holdings distributes it to customers in exchange for dollars.
Customers can then trade it on virtual public leisures,
known as block chains, or via private exchanges.
They can use it to purchase other cryptocurrencies or to
pay for goods and services,
just like Russian companies. In fact,
it is the most traded cryptocurrency,
as many as one $20 billion
worth of these stable counts.
Stable coins change hands each day.
It is often traded about twice as much as Bitcoin.
In fact, in 2023 Tether transactions totaled over $10 trillion.
Like I said, the stable coin works much like dollar.
But unlike government issued currency inside the banking system,
authorities have limited the have limited ability to trace its
use around the world.
And because of this Tether has emerged as one of
the worlds default black market payment methods.
And Russian firms, by the way,
are making the most of it.
In order to avoid sanctions,
the middle men take payments from the importers in rubles
in their Russian bank accounts
they converted into the cryptocurrency and then payout the foreign
suppliers in their local currency.
Wherever he took Kalashnikov concerns order to Kynex,
it was priced at about CN¥70 million.
That is just under $10 million.
You see, Swarev is notorious for such trade schemes.
In fact, when Russia invaded Ukraine,
Swarev wrote on a personal blog that readers should protect
their savings from the plummeting ruble by buying Tether on
Guarantex.
And for those who are not aware,
Guarantex is a Moscow based crypto exchange.
It basically works almost exclusively with Russian clients,
whereas reasoning was that the Western regulators would not be
able to shut it down.
Only two months later, the US blacklisted Guarantee X for
being a haven for cyber criminals,
but as we have claimed,
its business continued to thrive.
Meanwhile, Tether has been increasingly showing up in investigations tied
to money laundering,
terror financing and sanctions evasion.
And its not just the Ukraine war.
The cryptocurrency has been used in financing Hamas,
paying Chinese fentanyl suppliers, funding the North Korean nuclear program
and helping sanctioned Russian oligarchs by sanctioned Venezuelan oil.
You see, it has become the go to currency for
all illicit trades.
It is funding war and terrorism.
And despite all this, we continue to lack regulations as
far as crypto trading is concerned.
When will it be scrutinized is the question.
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